Stock-Based Compensation

12 Months Ended

May 31, 2012

Share-based Compensation [Abstract]

Stock-Based Compensation

Stock-Based Compensation

Under the 2005 Equity Compensation Plan adopted by Cintas in fiscal 2006, Cintas may grant officers and key employees equity compensation in the form of stock options, stock appreciation rights, restricted and unrestricted stock awards, performance awards and other stock unit awards up to an aggregate of 14,000,000 shares of Cintas' common stock. At May 31, 2012, 8,171,124 shares of common stock are reserved for future issuance under the 2005 Equity Compensation Plan. The compensation cost for stock-based awards was $20.3 million, $15.2 million and $15.3 million for the fiscal years ended May 31, 2012, 2011 and 2010, respectively. The total income tax benefit recognized in the consolidated income statement for share-based compensation arrangements was $5.6 million, $4.5 million and $3.9 million for the fiscal years ended May 31, 2012, 2011 and 2010, respectively.

Stock Options

Stock options are granted at the fair market value of the underlying common stock on the date of grant. The option terms are determined by the Compensation Committee of the Board of Directors, but no stock option may be exercised later than 10 years after the date of the grant. The option awards generally have 10-year terms with graded vesting in years 3 through 10 based on continuous service during that period. Cintas recognizes compensation expense for these options using the straight-line recognition method over the vesting period.

The fair value of these options was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:

	2012		2011		2010
Risk-free interest rate	2.4	%	2.5	%	3.9	%
Dividend yield	1.7	%	1.5	%	1.3	%
Expected volatility of Cintas' common stock	37.0	%	30.0	%	30.0	%
Expected life of the option in years	7.5		7.5		7.5

The risk-free interest rate is based on U.S. government issues with a remaining term equal to the expected life of the stock options. The determination of expected volatility is based on historical volatility of Cintas' common stock over the period commensurate with the expected term of stock options, as well as other relevant factors. The weighted average expected term was determined based on the historical employee exercise behavior of the options. The weighted-average fair value of stock options granted during fiscal 2012, 2011 and 2010 was $12.08, $8.04 and $8.23, respectively.

The information presented in the following table relates primarily to stock options granted and outstanding under either the 2005 Equity Compensation Plan or under previously adopted plans:

	Shares		Weighted Average Exercise Price
Outstanding, May 31, 2009 (1,914,710 shares exercisable)	6,359,424		$	38.91
Granted	1,070,798		28.52
Canceled	(963,016	)	35.98
Exercised	—		—
Outstanding, May 31, 2010 (1,838,530 shares exercisable)	6,467,206		37.63
Granted	2,030,764		32.42
Canceled	(833,267	)	38.76
Exercised	—		—
Outstanding, May 31, 2011 (1,945,207 shares exercisable)	7,664,703		36.12
Granted	1,638,907		36.26
Canceled	(1,591,480	)	36.90
Exercised	(103,013	)	32.66
Outstanding, May 31, 2012 (2,105,702 shares exercisable)	7,609,117		$	36.04

The intrinsic value of stock options exercised during fiscal 2012 was $0.6 million. The total cash received from employees as a result of employee stock option exercises for the fiscal year ended May 31, 2012, was $3.3 million. There were no stock options exercised during the years ended May 31, 2011 or 2010.

The fair value of stock options vested was $12.9 million, $9.0 million and $6.8 million for the fiscal years ended May 31, 2012, 2011 and 2010, respectively.

The following table summarizes the information related to stock options outstanding at May 31, 2012:

		Outstanding Options			Exercisable Options
Range of Exercise Prices	Number Outstanding	Average Remaining Option Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$ 20.29 – $ 31.00	1,725,722	7.50	$	26.22	176,768	$	26.97
31.01 –  34.27	1,279,826	8.61	33.99		60,390	33.50
34.28 –   39.36	2,410,094	6.77	37.49		622,774	38.69
39.37 –    50.47	2,193,475	2.48	42.51		1,245,770	42.65
$ 20.29 – $ 50.47	7,609,117	6.01	$	36.04	2,105,702	$	39.90

At May 31, 2012, the aggregate intrinsic value of stock options outstanding and exercisable was $22.4 million and $2.1 million, respectively. The weighted-average remaining contractual term of stock options exercisable is 2.1 years.

Restricted Stock Awards

Restricted stock awards consist of Cintas' common stock that is subject to such conditions, restrictions and limitations as the Compensation Committee of the Board of Directors determines to be appropriate. The vesting period is generally three years after the grant date. The recipient of restricted stock awards will have all rights of a shareholder of Cintas, including the right to vote and the right to receive cash dividends, during the vesting period.

The information presented in the following table relates to restricted stock awards granted and outstanding under either the 2005 Equity Compensation Plan or under previously adopted plans:

	Shares		Weighted Average Grant Price
Outstanding, unvested grants at May 31, 2009	981,369		$	30.29
Granted	597,514		24.63
Canceled	(53,278	)	27.85
Vested	(118,254	)	36.57
Outstanding, unvested grants at May 31, 2010	1,407,351		27.45
Granted	712,721		31.59
Canceled	(66,754	)	25.54
Vested	(135,936	)	39.26
Outstanding, unvested grants at May 31, 2011	1,917,382		28.22
Granted	452,267		35.95
Canceled	(188,685	)	30.62
Vested	(291,968	)	27.60
Outstanding, unvested grants at May 31, 2012	1,888,996		$	29.93

The remaining unrecognized compensation cost related to unvested stock options and restricted stock at May 31, 2012, was $64.4 million. The weighted-average period of time over which this cost will be recognized is 3.3 years.